Detailed Answer
Answer (A) is correct. R&D costs are expensed as incurred. However, legal work in connection with patent applications or litigation and the sale or licensing of patents are specifically excluded from the definition of R&D. Hence, the legal costs of filing a patent should be capitalized. The patent should be amortized over its estimated economic life of 10 years. Amortization for the year equals $1,700 [($34,000 ÷ 10) × (6 ÷ 12)]. Thus, the reported amount of the patent at year end equals $32,300 ($34,000 – $1,700).